Buy-Here-Pay-Here Auto Dealers Explained in the Topeka Kansas Area
Many people are scared of obtaining an auto loan after they have just gone bankrupt. Some even believe that it will be almost impossible to get a car loan because their credit report indicates they declared bankruptcy. As this article explains, this common belief is untrue.
You might be surprised to know that you can get an auto loan after bankruptcy. The only difference is that the interest rate on your loan might be higher you can be asked to make a larger down payment as a sign of commitment.
I'll explain some tips below on how you can easily get an auto loan to get that car that you love.
The first thing is you should do is know your credit score. It's important to be confident that your credit report is 100% error free before handing it over to your lenders--especially the sections that overviews your prior auto loans. A car loan lender will feel encouraged to offer you a loan if he or she sees that your past loans were paid in time.
Also, you should budget down payment for the loan. A substantial down payment will likely make the lender want to do business with you.
Additionally, you should also consider getting a pre-approved for your auto loan. You should do your loan shopping within a 24-hour period. When a lender "pulls your credit," or makes a credit inquiry, your credit score can be negatively affected.
Be very careful when applying for an auto loan from a dealership. Even though the loans they offer might be a bit convenient, their interest rates can be high. Make sure you double-check everything before you sign.
In conclusion, after you have received your loan, ensure that you make your payments as soon as possible. This helps to improve your credit after bankruptcy.
Brief History of Auto Loan Rates
Auto loan rates have reduced rapidly over the years. This is partly because of the competition that has been taking place from big lenders like banks and the instability of the Federal Funds Rate.
A recent study of auto loan rates has shown that major car brands including Honda, Acura, Kia, and Mazda, have reasonable APRs that are below 1%. Other popular brands like BMW and Chevy offer 2%, and the most expensive auto loan brands like Ford and Fiat are still under 5%.
The Difference Between Variable and Fixed Rate Auto Loans
Two traditional car loan types will be provided for you whenever you are shopping for loans. There is the Variable rate and the Fixed rate. We all know that the lower the interest rate, the better, but there are sometimes when these two types of loan get mixed up.
Variable Rate Auto Loans
The difference between the variable rate and the fixed rate is that with variable rate changes in line with the U.S. prime interest rate, a standard benchmark used by U.S. banks and other loan lenders. This means that when the U.S. prime rate is low, you should go for variable rate auto loan. But it's important to point out that variable rate options become risky when the loan is for a longer time because U.S. prime rates can increase anytime and you cannot predict when it will increase.
Fixed Rate Auto Loans
Fixed rate auto loans are sometimes better than variable rates because they do not fluctuate. You can be sure that you will pay the same rate for your loan whether the U.S. prime rate increases or decreases. This makes it easier for you to calculate and to be able to plan how you are going to repay your loan. Most car owners always consider the fixed rate as the best option for short-term loans with reasonable and easier payment plan.
How to Calculate your Annual Percentage Rate (APR)
It's essential to understand your Annual Percentage Rate (APR) before buying a car with an auto loan. The APR is the total amount of you will pay over a year on your car loan.
It's important to note that your APR is not the same as your interest rate. Your APR is the number that will be used to determine how much interest you are going to pay over a year depending on how much you borrowed.
- Your APR = (interest rate/term) multiplied by the (number of terms in a year)
For example, if the interest rate on the auto loan you borrowed is 2% for each term and you are told to pay once a month, then your Annual Percentage Rate is 24% (2 * 12 months in a year).
Also, your credit score directly affects your interest rate and APR. Your lender will offer you an APR based on your financial history.
Online Auto Approvals: Are They Worth Taking Seriously?
Auto loan online approvals have been proven to make auto shopping financing less stressful. They serve as a good alternative to talking to a bank or a credit union before securing a loan. There are several sites online that offer reliable services.
The main advantage of shopping online for auto loan approval is that it is more convenient and offers several options that you can choose. They are fast; some will let you know if you are approved within a few minutes of applying.
Though, you should be careful when applying online because if the site does not pull your credit report, then the approval might be illegitimate and risky.
All online auto loans are not the same, the application process of each site is different, and their rates differ too including their customer service. A lot of auto lenders offer loans for new and used cars while there are some that include refinancing in the services they provide to their customers. You can read up reviews from past customers and do a bit of online research to make sure you are in good hands.